Liability Auto Insurance: How Much Coverage Do You Need?

Basic car insurance, also known as minimum or liability insurance, is the cheapest type of car insurance. It covers the least amount of damage and is the minimum amount of insurance required by state law. This type of insurance covers the cost of damage and injuries caused by the policyholder to other people and their property. It does not cover damage to the policyholder's car.

The cost of basic car insurance varies depending on the state and the insurance company. On average, basic car insurance costs $58 per month, but this ranges from $28 per month in South Dakota to $196 per month in Michigan.

What does basic liability insurance cover?

Basic liability insurance, often referred to as "minimum coverage", is a requirement to drive legally in most states. It falls into two categories: bodily injury liability and property damage liability.

Bodily injury liability coverage applies to injuries caused by the policyholder to another person. This includes medical expenses, lost wages, and legal fees if the injured party files a lawsuit. It also covers injuries to the driver and passengers of the policyholder's car. It is important to have enough liability insurance to protect your assets, such as your home and savings, in case of a serious accident.

Property damage liability coverage applies to damage caused by the policyholder to someone else's property. This includes damage to other vehicles, fences, buildings, or other structures. It also covers the cost of removing damaged property, such as a tree, and defence and court costs if the policyholder is sued.

It is important to note that liability insurance does not cover damage to the policyholder's own vehicle or personal injuries. Separate coverage is required for these exposures, such as collision coverage and comprehensive coverage. Additionally, the minimum amount of liability coverage required varies by state, and it is recommended to purchase higher coverage limits than the state-mandated minimum.

How much does basic liability insurance cost?

Basic liability insurance, also known as minimum coverage, is the cheapest type of car insurance you can buy. It is also a legal requirement to drive in nearly every state. Basic liability insurance covers the cost of other people's injuries and property damage if you are found to be at fault for a car accident. It does not cover damage to your own vehicle or your own injuries.

The cost of basic liability insurance varies depending on factors such as your age, gender, driving history, credit score, location, and the make and model of your car. On average, basic liability insurance costs $58 per month, or $467 per year, but rates can be as low as $28 per month or as high as $196 per month, depending on the state.

According to one source, the national average cost of car insurance for a good driver with good credit is $549 per year. For a driver with an at-fault accident and good credit, the average cost is $817 per year, while a good driver with poor credit can expect to pay around $866 per year. If the driver has a recent DUI, the cost increases to $1,045 per year.

It is worth noting that the cost of basic liability insurance does not always reflect the minimum coverage limits set by the state. For example, Vermont and New York have the same minimum coverage limits, but Vermont's average car insurance rate is less than half of New York's.

When choosing a basic liability insurance plan, it is important to consider the coverage limits. The coverage limits determine how much the insurance company will pay out after a car accident or claim. For example, if you have a $15,000 limit for property damage liability and rear-end someone, your insurance company will only pay up to $15,000 for repairs to the other person's car. If the repairs exceed this limit, you will have to pay the difference out of pocket.

In about half of the states, basic liability insurance also includes coverage for injuries and uninsured motorists. This coverage is optional in states where it is not required. Personal injury protection (PIP) or medical payments coverage pays for your medical bills and lost wages if you or your passengers are injured in an accident, regardless of who was at fault. Uninsured and underinsured motorist coverage pays for your car repairs if the driver who hit you is uninsured or does not have enough insurance to cover the damage.

What is the difference between basic and full coverage?

Basic liability auto insurance covers injuries and damage you may cause to others on the road. It is required by law in most states. However, it does not cover injuries to you or your passengers, nor does it cover physical damage to your vehicle, even when you are at fault in the accident.

Full coverage auto insurance, on the other hand, includes liability insurance as well as collision coverage and comprehensive coverage. Collision coverage pays for damage to your own vehicle after an accident, regardless of fault. Comprehensive coverage pays for damage to your vehicle from circumstances outside your control, such as natural disasters, theft, or vandalism.

Full coverage auto insurance is not a real insurance coverage and does not exist as a formal insurance category. There is also no consensus on what "full coverage" means, and it is neither definitive nor all-encompassing. It may include all state-required coverages, but it will not cover you in all situations.

Full coverage typically costs more than minimum liability insurance. However, it may benefit drivers who want to avoid expensive out-of-pocket vehicle repairs. It is also often required by lenders or lessors if you finance or lease your vehicle.

In summary, basic liability insurance covers only the minimum required by your state, while full coverage includes additional protections for your vehicle and may be required by your lender.

When should I get basic liability insurance?

Basic liability insurance is a requirement for drivers in nearly every state. It is the minimum coverage that's legally required in your state and is often called "minimum coverage". Basic liability insurance covers the financial cost of injuries and damage to other people or their property that you are responsible for. This includes medical bills and repairs to the other driver's car.

Basic liability insurance does not cover repairs to your own car. For this, you would need to purchase collision insurance, which is part of a full coverage policy.

Basic liability insurance is a good option if you have an older car that is not worth much, you are comfortable with minimal coverage, you don't drive much, or you are a young driver with high rates.

If your car is leased or financed, you will usually be required to get a full-coverage policy. It is also recommended that you get a full-coverage policy if your car is worth more than a few thousand dollars, as repairs are likely to be costly.

You should also consider getting more than basic liability insurance if you:

• Loan or lease your car
• Drive long distances or commute
• Want to avoid unexpected bills

In addition to basic liability insurance, some states require other types of coverage, such as personal injury protection (PIP) or uninsured motorist coverage.

When should I not get basic liability insurance?

Basic liability insurance is not always the best option for drivers. While it can be a more affordable choice, it may not provide sufficient coverage in the event of an accident. Here are some scenarios where opting for basic liability insurance may not be advisable:

• When you live in a state that requires more coverage: In most states, drivers are required by law to carry liability insurance, but the minimum coverage limits vary. Some states mandate additional types of car insurance, such as uninsured motorist coverage, personal injury protection, or medical payments coverage. If your state requires more than just basic liability insurance, opting for the minimum coverage required by law may be a better choice.
• If you lease or finance your vehicle: Lenders typically require comprehensive and collision insurance on your policy when you lease or finance a car. Comprehensive insurance covers losses due to incidents like theft, fire, or natural disasters, while collision insurance covers damage to your vehicle in an accident. Basic liability insurance does not include these coverages, so it would not meet the requirements of your lender.
• When you can afford more coverage: Accidents can be costly, and it's essential to have sufficient coverage to protect yourself financially. If you can afford more than the state's minimum requirements, consider purchasing higher liability limits or additional types of insurance, such as personal injury protection or uninsured/underinsured motorist coverage. This will provide you with more comprehensive protection in the event of an accident.
• If you have a high net worth: In the unfortunate event of a severe accident, basic liability insurance may not provide enough coverage to protect your assets. If your net worth is substantial, consider purchasing higher liability limits or an umbrella insurance policy to ensure that you have adequate coverage.
• When you have passengers or family members in your car: Basic liability insurance typically does not cover injuries to immediate family members in your car. If you frequently drive with passengers or family members, consider opting for additional coverage, such as personal injury protection or medical payments coverage, to ensure that everyone in your vehicle is protected.
• In the case of frequent driving: If you drive regularly, the chances of getting into an accident increase. With basic liability insurance, you may not have sufficient coverage for medical bills, property damage, or legal fees resulting from an accident. Consider opting for a policy with higher liability limits or additional coverages to ensure you're adequately protected.

Frequently asked questions